Market Pulse for February 2018

A senior economist with the National Association of Home Builders (NAHB) supplied commentary and data about multifamily starts, price indices, existing condo sales and building materials.
Source: NAHB

Multifamily Starts:

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, starts of buildings with five or more units rose by 0.8 percent at a seasonally adjusted annual rate in November 2017, to 359,000, after a 14.8 percent increase in October. Over the past 12 months, starts of five or more unit buildings rose by 11.1 percent in November, following the 20.4 percent decrease in October.

NAHB’s Multifamily Production Index (MPI) weakened in the third quarter of 2017. The MPI measures builder and developer sentiment about current conditions in the multifamily market on a scale of 0 to 100. The index is scaled so that a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse. The MPI dropped 10 points to 46 in the third quarter of 2017, which is the lowest reading since the second quarter of 2011.

Source: NAHB

CPI vs. Rent:

The headline Consumer Price Index (CPI) rose by 0.4 percent in November on a seasonally adjusted basis. Over the month of November, the Energy Price Index increased by 3.9 percent, after a 1 percent decrease in October. Meanwhile, food prices were unchanged in November. Excluding historically volatile food and energy prices, “core” CPI rose by 0.1 percent, slower than the 0.2 percent increase in October. Shelter prices, which are the largest consumer expenditure category, grew by 0.2 percent as rental prices, a component of the shelter index, grew by 0.3 percent in November. Since the increase in rental prices exceeded the growth in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index rose over the month of November, increasing by 0.2 percent. Over the past year, NAHB’s Real Rent Index has risen by 1.9 percent.

Source: NAHB

Existing Condo Sales and Prices:

Sales of existing condominiums and cooperatives rose by 14.3 percent at a seasonally adjusted annual rate to 720,000 units in November 2017. Regionally, sales in the Midwest were unchanged, while sales rose in the Northeast (7.7%), South (16%) and West (23.5 percent). The months’ supply of homes decreased to 3.4 months, from 3.9 months in October. Median prices on condos and co-ops nationwide rose by 8.8 percent over the past year to $242,500 in November 2017. Median prices in the Northeast, Midwest, South and West increased by 7.2 percent, 4.4 percent, 6.9 percent and 12.3 percent, respectively.

Source: NAHB

Building Materials:

The price of inputs to construction rose by 4.8 percent on a not seasonally adjusted basis over the 12 months ending in November 2017. This component of the Producer Price Index is composed of the price of inputs to new construction and the price of maintenance and repairs. Over the past year, the price of inputs to new construction increased by 4.7 percent, inputs to new non-residential construction (5%), and inputs to new residential construction (4.5%). The price of maintenance and repairs construction grew by 4.8 percent over the past year, inputs to non-residential maintenance and repairs (5.1%) and inputs to residential maintenance and repairs (4.4%). Meanwhile, the price of oriented strand board (OSB) grew by 36.5 percent, cement (4.7%), Gypsum (8.5%) and softwood plywood (30.1%), over the past 12 months.

Source: NAHB

Jing Fu is a senior economist at NAHB. She monitors developments in the economy to identify trends and issues related to the housing industry. She also assists in forecasting and analyzing the state and metropolitan area housing market, producing research and articles detailing sectors and the geography of the home building industry. Prior to joining NAHB, Jing worked at Thomson Reuters as a data specialist and has extensive knowledge and experience on quantitative research and large data set analysis. She holds an M.A. in Economics from the University of Kansas and is currently completing the requirements for her Ph.D.